09:33, 28 June

Daily Analyse

Settles Around 108 after BOJ Hints at Further Easing

Despite the fact that it has rallied a little in the last few days, the USDJPY has moved considerably in the last couple of months falling from above 112 down to a 2019 low below 107 a few days ago. Several weeks ago it enjoying some support from around 109 and trading back and forth between 109 and 110.50, before dropping through the support at 109 and moving lower. The 109 level remains a key level and is likely to play a role should the USDJPY continue to rally higher.
Throughout May the USDJPY fell lower from another key level of 112 after the currency pair met resistance there for a couple of weeks and was unable to push through. It was able to push up to its highest level this year at 112.40 before being sold off and returning to the support at 109. To start the year it generally traded within a well established range between 110 and 112 receiving support and resistance from those levels respectively.

Despite it being some distance away, the 112 level remains very significant as it provided support to the currency pair in the last few months of 2018 whilst offering strong resistance in the period since. Throughout this year the USDJPY has done well to rally higher from a significant drop at the start of the year which saw it plummet to below 103, from where it then steadily climbed higher to the 112 level. Throughout most of December 2018, the USDJPY fell sharply from another well established range between 112 and 114, culminating in the sharp drop to start this year.

Last week the Bank of Japan (BOJ) kept monetary policy steady but Governor Haruhiko Kuroda indicated a readiness to increase stimulus as global risks overshadow the economic outlook, joining U.S. and European central banks in dropping hints of additional easing.  Governor Kuroda said the central bank could combine bigger asset buying with interest rate cuts if needed to keep the economy on track to achieve the 2% inflation target.  “If the economy loses momentum toward achieving our price target, we’ll of course consider expanding stimulus without hesitation,” he told a news conference.  As the lingering U.S. - China trade war adds pressure on the slowing global economy, the BOJ joined central banks across the world that are shifting towards easing policy.  It is widely believed that the U.S. Federal Reserve will cut rates in July, and if so, the BOJ will strengthen its forward guidance to keep yen rises in check.  “Downside risks regarding overseas economies are big, so we must carefully watch how they affect Japan’s corporate and household sentiment,” the BOJ said in a statement announcing the policy decision